Correction to post #1544:
In Sept. 1 story, "Latin American drop could hit range of
U.S. firms" read in 20th paragraph ... "Computers: EMC Corp.'s
operating margin in the region is 22 percent and Stratus
Computer Inc.'s is 12 percent. An EMC spokesman said EMC's
exposure was minimal since it received less than 1 percent of
its total revenue from Latin America" ... instead of ... "EMC
Corp. receives about 22 percent of its operating margin from
the region, and Stratus Computer Inc. 12 percent (correcting
operating margin figures and adding level of EMC exposure).
A corrected repetition follows.
By Ian Simpson
NEW YORK, Sept 1 (Reuters) - A wide range of U.S. companies
could be hurt by any economic slide in Latin America, a big
market for U.S. exporters, analysts said.
They told Reuters vulnerable industries could include
banks, auto makers and food companies trading with Latin
America.
The area has been hit by fears that shocks from Russia's
financial crisis could cause economies in Latin America, a
fellow emerging market, to tumble. Latin American stock markets
have fallen 52 percent this year <.CEFL=USD>.
Troubles in Latin America would press U.S. companies
already battered by worries about Russia and from lower
earnings brought on by the sputtering Asia economies.
After-tax profits rose at a 1.1 annual rate in the second
quarter, the Commerce Department said last week. But
year-over-year, profits fell for the first time since 1989.
"I don't think people realize how significant Latin America
is to the U.S. economy and corporate profits," said Eduardo
Cabrera, Latin American strategist at Merrill Lynch.
"We're the little brother to the U.S. and the little
brother is getting beaten up. And it looks like its going to
spread to the big brother," he said.
Latin America took about 18 percent, or $114 billion, of
U.S. exports last year, according to the Commerce Department.
Mexico alone received 11 percent, making it the second-biggest
buyer of U.S. goods and services.
Warning signs flashed last week when Merrill Lynch cut its
rating for Coca-Cola Co. (NYSE:KO) and Prudential downgraded Latin
American bottler Panamerican Beverages Inc (NYSE:PB).
Analysts put troubled Latin American economies, including a
possible devaluation of Venezuela's currency, among reasons for
the downgrade.
The economic turmoil has boosted risk premiums on Latin
American debt, making it tougher for regional governments to
finance deficits. They then would have to cut spending,
trimming economic growth even further.
Analysts said Latin American downturn would prompt
investors to pull more money out of regional stock markets and
cut into U.S. companies' earnings.
Brian Gendreau, an emerging market strategist at Salomon
Smith Barney Asset Allocation, said a Latin American downturn
would prompt investors to pull more money out of regional stock
markets and cut into U.S. companies' earnings.
U.S. companies "will be doing less business there," he
said. "You'd probably get an effect across the board."
Merrill Lynch listed numerous U.S. companies that do a lot
of business in the region. The figures are from November 1997
reports and the brokerage said the data were still valid.
Among companies with top exposure, listed by sector:
-- Cosmetics and household goods: Avon Products (NYSE:AVP) and
Colgate-Palmolive Co (NYSE:CL) . Avon gets a third and Colgate 24
percent of its sales in Latin America.
-- Airlines: AMR Corp. (NYSE:AMR) gets 15 percent of its
revenue from Latin America.
-- Auto makers: General Motors Corp. (NYSE:GM) and Ford Motor
Co. (NYSE:F) have major investments in Brazil. Merrill put Latin
America's impact on 1997 earnings a share at just under 9
percent for both companies.
-- Computers: EMC Corp.'s (NYSE:EMC) operating margin in the
region is 22 percent and Stratus Computer Inc.'s (NYSE:SRA) is 12
percent. An EMC spokesman said EMC's exposure was minimal since
it received less than 1 percent of its total revenue from Latin
America
Merrill Lynch analyst Steve Milunovich said Xerox Corp.
(NYSE:XRX) got about 10 percent of its revenues from Brazil and
Unisys Corp. (NYSE:UIS) had 11 percent of revenues from Latin
America, slightly more than other industry leaders.
-- Food and agribusiness: Latin America accounts for 36
percent of profits for International Multifoods Corp. (NYSE:IMC).
CPC International Inc. (NYSE:CPC) had 23 percent of profits from
the region.
Among banks, BankBoston Corp. (NYSE:BKB) has the greatest
exposure to Latin America, with 24 percent of its assets in the
region, according to Sanford C. Bernstein & Co. Inc.
Bankers Trust Corp. (NYSE:BT) and Citicorp (NYSE:CCI) have about
12 percent of assets in the area.
According to the Commerce Department, top exports to six of
the biggest countries in the first half of 1998 were electrical
machinery, motor vehicles, office machinery and computers and
telecommunications equipment.
Those sectors made up 38 percent of exports to the six
nations -- Peru, Brazil, Argentina, Chile, Venezuela and
Mexico.
Department figures show U.S. companies' direct investment
in Latin America totaled $172.5 billion, or about 21 percent of
overseas investment, at the end of 1997.
Copyright 1998, Reuters News Service |
